Gabe Newell & Valve

In 1996, Gabe Newell walked away from Microsoft. He had been employee number 271, hired on the recommendation of Steve Balmer, and had spent 13 years helping build the first three versions of Windows. He left with a fortune in stock options. A Harvard dropout with nothing left to prove in corporate software. On his wedding day, he and fellow Microsoft veteran Mike Harrington filed the paperwork for a new company. They considered names like Hollow Box, Fruitfly Ensemble, and Rhino Scar before settling on valve corporation. They funded the entire operation themselves. No venture capital, no publisher advances, just two former Microsoft engineers betting their own wealth on a single idea. That video games could tell stories the way films do. Two years later, Half-Life launched and proved them right. It was a critical and commercial landmark that redefined what a first person shooter could be. Harrington sold his stake and left in 2000. Newell kept building. What came next changed the industry permanently. While developing Half-Life 2, Newell conceived a digital distribution platform called Steam. Launched in 2003, it started as a simple delivery tool for valve zone games and patches. Within a decade, it controlled roughly 70% of the global PC game download market. Today, Steam has over 150 million monthly active users, and in 2025, processed an estimated $16.2 billion in game sales. The business model is elegantly simple. Valve takes a commission on every game sold through Steam, starting at 30%, dropping to 25% after $10 million in sales, then 20% after 50 million. For a platform that requires no physical inventory, no retail shelf space, and no shipping logistics, the margins are extraordinary. Valve's estimated commission revenue in 2025 exceeded $4 billion at a gross margin above 90%.